The problems of economics as an academic pursuit have a sociological origin
from Gerald Holtham (originally a comment)
The problems of economics as an academic pursuit have a sociological origin. The subject matter of economics is of interest to nearly everyone who lives in a commercial society and has to make a living. Intelligent people develop opinions about it and advance opinions in a way they would not do about astronomy or quantum physics. Similarly every politician has a story about the economic policy to be followed. This situation has created a strong form of credentialism among academic economists, evidenced by the use in the USA of the term “PHD economist” i.e. distinguishing a “real” economist from an economic journalist or mere informed commentator. This desire to define and secure a profession of economists has led not only to credentialism but to formalism. There must be hoops to jump through, filters to pass, if “real” economists are to be distinguished. An emphasis on mathematical technique is just such a filter. From credentialism and formalism comes a self-referential approach that holds “economic problems must have economic explanations and economic solutions”. That makes it illegitimate to introduce “non-economic” elements into economic theory. Demarcation and the exclusivity of “economics” is thereby reinforced. Non-economic elements are often considered to include any form of “irrational” behaviour. Unfortunately some schools of economics at that point finalise their separation from the real world by failing to distinguish “procedural rationality”, which is a useful simplifying assumption, from “substantive rationality”, which assumes a never-never land of near-perfect knowledge and ubiquitous equilibrium. The distinction, due to Herb Simon, was apparently too subtle for the neo-classical school. Ideology also plays a part in promoting some schools of economics. Theories that depict a self-stabilising system in which everyone is doing as well as possible are remote from reality but convenient for the conservative interests in society that wish to resist change. Once this structure is in place it is difficult to pursue a career as an academic economist without going along with a substantial part of it.
The solution to a problem that is sociological and political does not lie in abstract discussions of methodology or trying to identify philosophical mistakes. It lies in being open-minded to insights from outside economics , in constructing theories that use appropriate formal methods not theories that are constructed to show off command of formal methods whether appropriate or not. It means defining the domain of theoretical propositions and accepting the verdict of empirical data relevant to that domain. In other words the answer to people doing it wrong is not to despair and retreat into philosophy; the answer is to do it right. No-one should claim that is easy.
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Great article, Gerry! But I would still argue that both philosophy and methodology — even when we accept “the verdict of empirical data” — to a large degree can help us getting things right when it comes to both constructing and evaluating theories and models.
Sociological and political. Following are some of my thoughts about it.
Generally professions have a set of (legally sanctioned) guidelines that permit admission to that profession. Those guidelines include: ethical expectations of members, tests to pass for admission to that profession, qualifications to be met, legal sanctions in place for the practice of that profession and boards to review accusations of unethical behaviour, rules stipulating who may call themselves by the name of that profession.
My actual profession — Social Work — has a list of competencies and a requirement to continually update my professional knowledge and skills.Every year I must submit a plan subject to review by the professional standards committee. To call myself a social worker I must belong to the College of Social Workers and thus can be called to account for my actions by other professional social workers. I may not use that title unless I am a paid-up member of the College.
None of these is in place for economists. Thus I reject it as a profession. Or I can decide to include myself as a member of the club and call myself an economist. Who is there to prevent that?
The legal sanctions I am subject to as a social worker are put in place by politics. But now we have a conundrum because where do we stop? There are many other working groups who could be called “professionals” but are not legally sanctioned as such. Should they be? They have standards to me also.
This brief provides somewhat novel insight that helps cut through the technical chatter.
“There must be hoops to jump through, filters to pass, if “real” economists are to be distinguished. An emphasis on mathematical technique is just such a filter.” This statement is true in my life as far back as grad school in the 60s.
But in my view the phenomenon reaches back at least 150 years to the time of William Stanley Jevons. And I think what has driven the process all along has been the need to provide the imperial clothes for the ruling power of predatory corporate capital. If we take the trouble to look, we can see that the emperor has no clothes. Once we see this, and fully acknowledge what the rulers don’t want us to know — that socioeconomic class conflict is endemic to the power of capital — then we can begin to craft a new approach to economics.
Otherwise the current political economy is just more technocratic chatter.
I recommend people read this excellent essay.
“Neoliberalism: Political Success, Economic Failure” – Robert Kuttner
https://prospect.org/economy/neoliberalism-political-success-economic-failure/
Kuttner avoids ideology and philosophy, instead sticking to the empirical evidence.
I certainly agree at another level with Lars Syll “… that I would still argue that both philosophy and methodology — even when we accept “the verdict of empirical data” — to a large degree can help us getting things right when it comes to both constructing and evaluating theories and models.”
Nevertheless, it is instructive what a damning case can be made against neoliberalism (market fundamentalism) by simply sticking to the evidence of its outcomes as Kuttner has done.
“I certainly agree at another level with Lars Syll “… that I would still argue that both philosophy and methodology”
Correct. Philosophy is about concepts AND ethics. The concept of grace accurately describes the temporal universe and the economy in that both are interactive, integrative and flowing processes. Grace also is ethically the active form of love which in the temporal universe means lovING, and conceptually grace also means Gifting/FREE Gifting.
There is no more empirically and descriptively accurate, no better ethical concept, and no better and more relevant economic problem resolving concept than grace. All economists and pundits need to ALLOW themselves to do is awaken to its efficacy.
I’m sorry, but Kuetter wrote a similar article published in the Alantic Monthly in 1985, that’s 35 years ago, which I cite on pages 34 and 57 of my book: Management and Higher Education Since 1940.(Cmbridge Univ. Press, 1989), a book well received, especially in a review by George Bain, Principal of the London Business School,in the Financial Times. Cambridge University Press, Financial Times, London Business School, not exactly obscurity, and yet ignored by you. This is old hat, what is wrong with this blog.’s editors.
Kuettner’s 1985 piece is called “The Poverty of Economics,” I comment on p. 52 of my 1989 book, “”Kuettner tells us that economists, despite all the proof to the contrary, continue to act as if the givens of neoclassical economics are true. They prefer science to culture. But what good is a science if it cannot cope with what it purports to explain. And how can people insist that it does provide the answers when the evidence clearly shows it is inadequate to the task. To insist on science in such conditions is really to assume an ideological not a scientific attitude (when a science cannot explain something but is nonethless clung to, that science becomes ideology).
Robert,
Can you give me a link to the article “The Poverty of Economics,” by Kuttner? I can’t find a link to it that is not pay-walled.
I am not sure that Kuttner could have written exactly the same thing in 1985. Thirty-five years of evidence have accumulated since then. Kuttner does make some reference to that evidence in the article I link.
Final point. Old hat is not old hat to new people or to people new to taking political economy more seriously. Such people are not likely to have read a 1985 article.
“Such people are not likely to have read a 1985 article.
Its a brobllem, making peeople historidqlly aware, but I thought this was one of the miissions of this blog. The Reference is to Robert Kuttner, “The Poverty of Economics,” Atlantic Monthly, 255, February 1985, 74-80. Also look at, D. McCloskey, “The Rhetoric of Economics, Journal of Economics Literature, 21 1983, 481-517. It was a big debate about the vilidity of neo-classical economics and econometics being incorporated into the New Economic History. I was involved in that debate for over 20 years, as an historian. Economist usually never reply to my comments, when they do they are like you,annoyed that I would refer to something in 1985, although it is part of a long debate literature going back to the 1960a. By the way the neo-classical economist lost that debate a long time ago. That is why knowing some history won’t hurt.
Robert,
I am fully in agreement that history matters. After all, it is the empirical record of “what really happened”. Of course, there are great practical and research difficulties in finding out “what really happened” and presenting it in an objective fashion. The historiography of history matters, if I can put it like that. I am not annoyed that you mention history, be it socioeconomic history or the history of scholarship about socioeconomic history.
Perhaps my history (as thumbnail biography) could explain something. I didn’t study history, economics or philosophy at universality. I studied some undergraduate science (medical science) and then switched to literature, television and cinema studies (media studies).
I studied literary criticism, narrative, textual and structural analysis and a little bit of (non-biblical) exegesis and hermeneutics. This would explainfor example why I (almost) get annoyed when people over-tout the work of Joseph Campbell in “The Hero of a Thousand Faces”, published in 1949. I refer to Campbell’s elucidation of the “structure of the monomyth”. I regard his work as largely preempted by earlier works, especially the “Morphology of the Folktale” published in Russian in 1928 by Vladimir Propp. Propp influenced Claude Lévi-Strauss and Roland Barthes.
However, to further back, Leo Tolstoy was already analyzing Russian folktales structurally circa 1865 or earlier. That’s what great writers do to learn their craft. “Siddhartha” by Herman Hesse was published in 1922 and perfectly “follows” Propp’s morphology, yet it precedes publication of Propp’s folktale morphology by six years. This indicates that great authors understood monomyth or folktale structure(s) artistically, either implicitly, intrinsically, unconsciously and/or conscious-analytically well BEFORE the academics figured it out and systematized the understanding. Practitioners seem to precede academics and theoreticians! That is an interesting historical and philosophical gem in itself.
But can I or should I expect everyone to know these obscure parts of literary and cultural history and analysis because I do? If one has obscure knowledge that does not mean one can expect everyone to have it. Obscure economic knowledge is percolating out of this blog to those whose specialties are in other arenas. That’s one point of this blog in my view.
I have been reading economics, political economy and philosophy in autodidact fashion for some time. This means I will likely know a few things which might surprise you and yet I will still have large lacunae which will horrify and annoy you.
Ikonoclast, we all bring limited lnowledge to the table, limited by the specificties of concerns in time and place, and to the accident of how we get educated. In my specific case I have had to cope with the nomotheistic takeover of economics, which in the 1960s pretty much shitcanned, on the grounds of methodology, my work and that of others I admired, especially David Landes, on Unbound Prometheus. So I fought this battle ardently (see,”Introduction: the Revisionists and ttheir thesis,” in the End of the Practical Man, 1984) until revisionisms turned onto farce when D. McCloskey abandonned their camp.For some reason, as you do, people say they respect historians, and then ignore them. That’s my problem with economists and sociologists. People in mnagement studies are more open minded, perhaps because of the reputation business historians, led by chandler, gained through his studies.
I have read the paper of Kuettner’s 1985 paper “The Poverty of Economics”. It was reprinted in a book Alterantives to Economic Orthodoxy. Four pages are hidden (pp.22-23 and pp.29-30) but it seems we can know the essential points that Kuettner wanted to contend. If there are some important points missing in these four pages, Robert can fill the lacking.
I am planning to write a series of comments with the title The Poverty of Economics below, but not as Reply to Robert. Comments with full width would be easier to read.
Lars, Thank you. I agree with you that it is necessary to have an appropriate methodology and discussion of methodology is legitimate. Perhaps I overstated the case; I was reacting to the fact that philosophical discussions on this blog seem to be more common than specific discussions of economic theories or proposals to reshape them.
I applaud the editors who have picked up Gerald Holtham’s comment as an article for everybody to discuss it. If one of the editors is Lars Syll, I applaud him heartily.
In spite of a concession made to Lars Syll in his Reply above on September 27, I support Gerald’s article completely.
The essence of Gerald’s comment is this:
Lars has a tendency to retreat in philosophy. He shows little enthusiasm in re-building economics in a right way. His methodology is skewed, because he does not recognize a simple dictum: It takes a theory to beat a theory.
All the efforts of heterodox economics should not be concentrated in an effort to criticize mainstream economics. We should always keep our efforts to construct our new theories and economics.
I agree with Lars that “both philosophy and methodology … can help us getting things right when it comes to both constructing and evaluating theories and models.” The problem is Lars’s efforts are too much concentrated to “evaluating” the existing mainstream theories and few articles are written in the direction of “constructing” new theories or economics. This unbalance of his efforts has created in this blog a bad atmosphere as if criticizing economics can replace economics. As Gerald concluded his short intervention, reconstructing economics is not an easy work but we should keep paying major part of our efforts in it.
A similar debate took place two and half eyars ago in the comments to Lars Syll’s article What is (wrong with) neoclassical economics?. It would be interesting to re-read the comments.
Apparently no one here except myself has the guts to suggest specific policies that would change neo-classical economics into something not only better but a thirdness greater oneness. In fact almost no one will even engage me on the efficacy of such. So I’m the only one here who practices BOTH philosophy AND methodology/policy. We never resolve problems by merely talking. Indeed it does take talking and acting, philosophy and policy. And not just palliative and piecemeal reforms like we’ve always done before, but pattern change.
If someone can show me a better and more resolving new pattern than Monetary Gifting. I’ll back them 100%.
Craig, it is not the question of guts. The problem is concerned with a discipline called economics. Without a good theory, a bold economic policy is a kind of gambles. It is normal that few people want to bet on your policy.that would change the world.
What is needed in reconstructing economics is a good insight, perseverance, and reasons.
“What is needed in reconstructing economics is a good insight, perseverance, and reasons.”
Indeed, a good insight and reasons like the fact that money is basically accounting, that it thus must obey the conventions of accounting like equal debits and credits must sum to zero, that retail sale is the terminal systemic ending point, thus the terminal cost and price summing point for every consumer item or service (and of all prior capital costs as well) and thus a 50% discount/rebate policy at that point is a way to immediately end individual income scarcity, business revenue scarcity and so systemic austerity….which every heterodox economist says is at the root of the problem. This is not to mention the numerous other beneficial effects and problem resolving potentialities that become doable with such a policy going into effect.
Do the math! And the insights will follow.
Craig,
Should I understand “a 50% discount/rebate policy at the retail point” as a negative VAT (Value Added Tax) or negative GST (Good and Services Tax)?
It is tempting to understand it as such without further details. If it is such how does Government financing work under such a regime? If it is not such who pays the discount/rebate?
Instead of saying “Do the math!” give us examples of the math. If I buy an item for $100 sticker-price then I get $50 back. Correct? Then I can buy an item for $50 and get $25 back. Then I can buy an item for $25 and get $12.50 back. And then so on. It’s a little like Zeno’s paradox as I approach the point of getting $200 worth of goods (at sticker-prices) for $100. Rounding errors and a cut-off of minimum purchase price will stop me from getting quite to $200 and thus terminate the “paradox”.
Or have I completely misconstrued this? But logically speaking, the government is the only party with any “incentive” or rather with the remit and capacity to offer the discount/rebate. It’s also the only way I can see that the books (national accounts and business accounts) would balance.
This discount/rebate policy would have to be paid for (in national account balancing terms) by any or all of
government money printing, government money borrowing or government revenue collection from other sources.
The thing is that the stimulus of the discount/rebate system (if set in stone at 50%) is on its own a massive blunt and inflexible instrument. Or again, have I completely misconstrued all this?
I would prefer that the 50% discount was reduced at retail because its immediately beneficial to the individual, but it could be administered the other way around.
Every penny of the discount would be created and rebated back to the enterprise giving it, by the monetary authority. That authority could be the FED in the USA, or some other national authority mandated to do so.
Example: Individual goes to the grocery store who has agreed to opt into the 50% discount/rebate policy and its rules. He/she buys $100 worth of goods and pays $50. The enterprise debits $50 to retail sales account and the monetary authority credits the account with $50. The individual’s purchasing power is doubled and the free and clear revenue available for the enterprise’s goods and/or services is also (potentially) doubled. All costs including profit and taxes are paid in full.
Example of 50% discount/rebate policy applied at both retail sale and at the point of note signing for a green electric automobile: The individual goes to the dealer and the $50k out the door costs including taxes on the EV is reduced to $25k at retail sale. Then, assuming creditability, the note (IMO best owed to the truly national publicly administered non-profit banking system) is reduced by 50% to $12.5k at 0% interest. (With the non-profit banking system the amount is simply written off and no interest is needed. With a for profit bank the monetary authority would simply credit the bank for the $12.5k and the individual would have to pay interest on the note.
Finance is necessary and doable for costly high tech economies to survive, but for-profit finance violates the “sanctity” so to speak of retail sale being the ending point for costs and the point where production becomes consumption (consumption is where any good or service LEAVES the economy and no one and no commercial entity has the right to charge one further costs other than the total financed, monthly for an agreed upon period without interest until paid off).
The 50% discounts ARE blunt instruments. Beneficial blunt instruments, and everything is accounted for. In the case of the second 50% discount at note signing, with the non-profit system the money is completely accounted for, but 50% of the total is simply destroyed with the debit-credit convention of double entry bookkeeping. No fuss, no harm.
5 discount/rebate policy
Craig,
Now I understand your proposal a bit better although far from completely. In the first instance, I would say it runs the risk of creating a great deal of goods and services inflation. Ceteris paribus (all other things being equal), my purchasing power, and that of all consumers, is doubled. The participating retailer know this and also has a huge competitive advantage over non-participating retailers, if any. In the absence of price controls (usually considered anathema), the retailer will raise the price of all goods and services, perhaps even doubling them to match the discount/rebate.
However, matters will not be ceteris paribus (other things will not be equal) as you envisage, so far as I can tell, the non-creation of credit money in the whole of the system. There will be no credit-money (or no debt-money if we look at it that way). I will no longer take a personal loan, for example, to buy a car for personal, not business, use. (I wouldn’t do that anyway as I would regard that as foolish but this is just an example). Instead of say taking a $25,000 loan to buy a $50,000 car, I would simply save the $25,000 and the “non-loan” or subsidy to buy the car.
There is now no credit-debt money in the system. The government is now taxing and/or printing money to fund the rebate. I will assume government borrowing of credit-debt money is also removed from the system. This would be consistent with the vision. The inflationary push of credit-debt money is removed so this is deflationary. It is replaced by (likely) government money creation simpliciter (purely and simply). Ideologically and ethically I like this aspect of the idea.
However, will it work in practice? That is the question. Firstly, would removal of the creation of credit-debt money be balanced, at least roughly, by the discount/rebate? Well, perhaps it could be IF the discount/rebate rate is set at the correct percentage to balance the removal of all credit-debt money from the system. However, the economy is not a stationary target so all settings in it are not stationary targets. The economy is a dynamic target.
Even if total flows (of money) are not changed, it matters what channels the flows follow and where the flows can be considered to commence and terminate (or where parts of the total flows can be considered to commence and terminate since much of the flows are circular with positive and negative feed-backs).
What I am saying here is at the very least you can expect a massive transition shock. That’s the best case scenario. The worst case scenario is perhaps hyperinflation an/or completely haywire and unpredictable perturbations and gyrations through all markets.
I actually do not know if there is a workable kernel to your idea. However, I do know, to a high degree of probability, that such a radical change would require a staged and lengthy social and economic-financial transition. The current economy is a ravening consumption drug-addict and credit-debt money is the drug. Expect acute withdrawal (and likely collapse and mega-deaths) if you perform a cold turkey cure on this system.
This suggests a staged withdrawal approach with empirical checks along the way. Credit-debt money cold turkey withdrawal would never fly politically anyway. The credit-debt money system will have to be defeated by an incremental “death of a thousand cuts” at the same time as we seek a non-quantitative growth circular economy to meet ecological and climate change dangers. It’s a big ask. I don’t think we have time left to turn this “supertanker” (the world economy) around. I think quite frankly our doom is already sealed. But we should try what we can.
”
I would say it runs the risk of creating a great deal of goods and services inflation.”
If a retailer raises a $1 loaf of bread by 20% and the retail discount is 50% it becomes $.60. How can that be inflationary? And if the each business model along the way to retail sale is taxed at a rate of 100% for any revenue they may or may not have made on the sale of products to create that loaf (because their competition being happy with the tax savings and revenue boosting effects of the discount policy has actually lowered their prices to $.95/loaf or $.45) how much of the greedy anti-social enterprises’ market share will their competition take from them?
“The participating retailer…”
There won’t be any non-participating retailers. If you have to get 100% of your best competitive price from the consumer alone and your competition only has to get 50%….you can’t compete and you’ll go out of business.
“There is now no credit-debt money in the system.”
No.
The government is now taxing and/or printing money to fund the rebate.
Creating it ex-nihilo. Taxes will actually be able to be greatly reduced in a directly distributive monetary system.
“I will assume government borrowing of credit-debt money is also removed from the system. This would be consistent with the vision.”
It will not borrow any money, simply create and directly distribute non-debt money in the forms of the universal dividend, the rebate monies and any government spending. The national non-profit banking and financial system will create loans for credit worthy borrowers who have legitimate purposes for wanting and needing it.
“However, will it work in practice? That is the question. Firstly, would removal of the creation of credit-debt money be balanced, at least roughly, by the discount/rebate? Well, perhaps it could be IF the discount/rebate rate is set at the correct percentage to balance the removal of all credit-debt money from the system.”
There isn’t any actual necessity to balance debt money creation and monetary gifting as the system is now in a continual state of beneficial price deflation. Instead of being thwarted by the assumed to be iron rule inflationary belief in the quantity theory of money, the economy has at least twice as much money circulating in it and greatly reduced prices. A state I refer to as “the higher ethical and universally beneficial monetary disequilibrium.”
“Even if total flows (of money) are not changed, it matters what channels the flows follow and where the flows can be considered to commence and terminate (or where parts of the total flows can be considered to commence and terminate since much of the flows are circular with positive and negative feed-backs).”
That’s how it is now and all will be accounted for under the new paradigm. The difference will be much more profit, prosperity, economic democracy…and sane ecological policy to boot.
“What I am saying here is at the very least you can expect a massive transition shock. That’s the best case scenario. The worst case scenario is perhaps hyperinflation an/or completely haywire and unpredictable perturbations and gyrations through all markets.”
Not necessarily. Of course there will be a period leading up to implementing such a program, but businesses will be warned and be made aware of the fact that if they inflate their prices greatly in the run up period before implementation that they will be taxed at a rate of 100% on any revenue garnered from such anti-social greedy and de-stabilizing actions. That’s why I suggest creation of a new governmental department seriously called The Dept. of Innovation, Competition, Boycotting and The Bully Pulpit which will publicly call out such actions and suggest to consumers that they consider boycotting such enterprises’ products because they are picking the individual’s pocket with such price inflation. The healthy and understandable reaction to anti-social greediness by commercial agents by someone who has been dominated for a long time by a crappy system and its lack of ethics and fair regulation…is anger. That’s one of the reasons we got Trump. And the proper reaction to the universally beneficial policies of Wisdomics-Gracenomics SHOULD BE appreciation. Businesses would need to consider these simple and basic truths…before they acted irresponsibly.
“It’s a big ask. I don’t think we have time left to turn this “supertanker” (the world economy) around.”
“Call me trim tab.” R. Buckminster Fuller
I want to clarify a couple of points. Politics is based on power, economics is based on profit. Political economics is politics based on economic arguments to achieve or maintain power. Economic policy is economic behavior based on the power to maximize profit. Neither can serve as the basis for a reliable economic model, but a reliable (real) economic model can be used in both cases to justify politics or economics.
.
Shiozawa has a tendency to retreat into historical revisionism and scientism and his literature-only mindset.
I thank Meta for reminding me that I have exchanged in late 2017 our opinions with Professor Robert Delorme on how to attack complexity, deep complexity in particular. I have re-read my comments and find my comments quite reasonable. The debate ended in December 2017, because it was the end of conference on Complexities in Economics.
Questions of complexity are so important for economics. In a sense, we can say that neoclassical economics went astray because it ignored them. This is also a big challenge for heterodox economics or for economics to be re-built.
It is deplorable that our exchange ended without elucidating our mutual misunderstanding, but I have no points in my comments that I want to change. I ask readers of this blog to read my comments as well as Delorme’s, which are comments on Delorme’s keynote article A Cognitive Behavioral Modelling for Coping with Intractable Complex Phenomena in Economics and Social Science: Deep Complexity of a web conference on Complexities in Economics.
If I can add a comment on our exchange now, I will ask Delorme to read our book Microfoundations of Evolutionary Economics published in 2019, because I believe Delorme misunderstood me as some economists who only seeks problems that they can solve. This book shows how I have struggled with the question of complexity. In Chapter 1, I have argued how to think about cognitive question and how to formulate human economic behaviors in an complex environment. But it also shows a way to attack complex phenomena, especially a complex system as big as the world economy. The world economy may not be a deep-complexity phenomenon in the eyes of Delorme, but still it treats one of most important problems in economics in relation to complexity. Recent economics such as behavioral economics and experimental economics treat only small-group interactions but the modern economy is from its beginning a large complex system and we need a theory on this system. This is my answer to Delorme’s last comment.
Let me add a warning to Meta. What he is doing is a violation of our copy right (Delorme’s and mine). Everybody has right to cite a part of anyone’s text without permission as long as it is necessary to one’s arguments, but to cite one’s text as a whole is not permitted. Even if he excluded a small part of a text from the citation, such an act is not permitted. Meta’s own contribution counts only nine lines among more than 100 lines. It is violating citation right. Copy right is an alienable right of the author of the text or any other intellectual expression. Meta is violating in his blog the copy right (including citation right) that is crucially important for any intellectual arguments..
The first of my links above does not work. Delorme’s keynote article in the web conference on Complexities in Economics. can be accessed here.
The methodology is always part of the theory. The use of a certain methodology inevitably leads to the same type of theory. By standardizing research methods, we lock ourselves in the illusion of knowledge. The truth of the theory must be substantiated by non-economic parameters, and perhaps for this, it will be necessary to revise sociology and history, to build a new social model, different from capitalism and socialism, and common to all history.
It is interesting that somebody is recollecting a past article and debate:
Lars Syll What makes economics a science?
Have we made any progress since then? Or, are we repeating (if not the same) a similar argument ?
I have been thinking about this: the lack of progress I mean. I read Das Kapital Vol. 1 in my early twenties (circa 1977) and not as part of any university course but simply out of interest. I had read nothing else at all on economics or political economy so I was a blank slate in every sense. Vol 1. made me an armchair socialist of sorts and an accepter of the labor theory of value for a time. My general beliefs afterwards could probably have been characterized as Fabian-like, although I knew nothing about Fabian Socialism per se. In practice, I accepted mixed-economy capitalism with a social-democratic steering hand. That pretty much describes the Australia economy in those times. Eventually, I preferred to shift from private enterprise employment to public (social security) employment as I did feel exploited in private enterprise.
For reasons of life course, I read nothing more on economics and political economy until circa 1997. Then I started reading an Australian economist, John Quiggin, and texts like “Economic Rationalism in Canberra: A Nation-Building State Changes its Mind” by Michael Pusey. “Economic Rationalism” was the Australian term for neoliberal economics, also sometimes termed market fundamentalism. Economic rationalism, as we called it, had begun reaching into the Federal public service by this time via the mechanisms of government policy and generic managerialism of American origin. I was baffled and angered by what was going on.
As an “unconscious Fabian”, I experienced the “reforms” of economic rationalism or neoliberalism as regressive. The very use of the term “reform” for these changes was near incendiary to me. I became intellectually radicalized and contested verbally with my managers and my union officials. To the former I was frank, at times, in expressing my opinion that the management and policy changes were anti-worker, anti-society and were destroying the efficiency and effectiveness of the workplace in delivering social security and welfare services. The union officials I accused of being “in bed” with the neoliberals. My fellow workers would not take open industrial action, which I spoke for at union meetings, and industrial law was rapidly changed across Australia to make industrial action very difficult for a workforce. docile in most places, to contemplate. We got screwed because we would not fight back. Neoliberalism defeated labor. I think we all know that now. But this is not the end of history. There is no end of (human) history unless and until homo sapiens goes extinct.
We have to take the attitude that lack of progress, in political economy, is a stage. Historical stages can take a long time to play out. Neoliberalism, 40 years old and counting, took over and ossified the system into a setting and orthodoxy which still seems unchangeable. But this phase is nearly played out. Great disruptions are coming as the neoliberal economy fails under its own internal contradictions and under exogenous shocks like zoonotic disease outbreaks and climate change. We are at a watershed moment. New thoughts are becoming thinkable. New political, economic and social sttructures will emerge. Don’t presume this will occur in a growth setting. It may well occur in a de-growth setting as a phase of catabolic collapse plays out.
Neoliberalism never took over in the German thought world, nor the Japanese. Why? because neither country had a democratic-liberal revolution=transformation in the 18th century. The whole story as it has been pitched on this blog is one of Anglo-saxonia. So I tried to see why and how Germany took a nonliberal course in the postWWII construction period. The German’s called their postwar reconstruction the social market system. It is not only German but also expressed in Nordic Management that Hoie Tore writes about, which the East Europeans have shown an interest after 1990. If you stay in Anglo-saxonia you have reason to be depressed. I didn’t because I got interested in the rise and fall of Germany as a great power, and its recovery in a nonliberal system post wwii.
Is there a specific Nordic leadership style and why should anyone care…?
Hoie Tore comments
Working for the Nordic Council of Ministers, I was asked a couple of years ago by the Secretary General at that time, Mr. Dagfinn Høybråten, to write a report on Nordic leadership (http://norden.diva-portal.org/smash/record.jsf?pid=diva2%3A1268251&dswid=1239). The topic had come as a suggestion from the Nordic governments, who saw a specific Nordic leadership style as something that separated the Nordic countries from how leadership is formulated and executed in other parts of the world.
Honestly, I hadn’t given a specific Nordic leadership style much consideration. However, as I started to think about it, one specific memory came to my mind. It was from when I lived for five years in China, 2008-13, working for the Embassy of Sweden. There was a concern that Swedish companies experienced problems recruiting talent: well-educated Chinese that would be essential for the company’s performance.
Said and done, I interviewed a substantial number of Chinese employees working for Swedish companies, and their (Swedish) managers. There was indeed a challenge to attract talent, since the companies couldn´t afford to pay the same wages as American, German or Chinese companies.
How did the companies handle this challenge? Well, they couldn’t afford to raise the salaries to the same levels as some other companies. The answer was instead good leadership. For example, they made sure that the Chinese staff got both responsibility and power when performing their daily tasks, that they had a good work-life balance, a chance to develop their skills and talent etc. – things that you can’t take for granted on the Chinese labour market but is the normal situation in the Nordic countries. But the leadership went further than just treating the staff well. The management also took matters such as sustainable development and social responsibility seriously, leading to employees taking pride in the organization they worked for.
This was of course not true for all Swedish companies and managers but for most of them.
The leadership style helped the companies to recruit talent. Equally important was that the employees stayed in the company longer time – in China, at least at that time, workers frequently changed to other companies, in order get higher salary. Staff at the companies I interviewed, not only stayed in the companies longer time, when they changed, they very often went to another Nordic company. (Chinese employees didn’t distinguish between Swedish, Norwegian, Finnish, Danish or Icelandic companies – or the countries for that matter. They were all Nordic, and they tend to think of the Nordic countries as very similar: developed, egalitarian with strong welfare states and a high level of environmental protection etc.)
This indicated to me that there was something in the Nordic leadership style that was important. That brings us back to the task that our Secretary General gave me. I soon discovered that research confirmed my main impression from China: In short, the Nordic leadership style included a strong element of delegation of power and responsibility to employees. It also meant a high degree of consensus seeking in the organizations. A Nordic leader also stresses the necessity of co-operation. In addition, he or she plays down their authority and often functions more as a coach for their employees rather than an authoritarian figure.
It is not difficult to recognize that the Nordic leadership style has significant value due to its ability to create conditions for high productivity, innovation and growth, while also providing high levels of satisfaction for employees and a good working environment. One researcher believes that discussing a specific Nordic leadership model is significant because of its aim to combine economic growth with democratic stability. It is a description that appears to make good sense.
But the Nordic leadership style goes beyond how you treat your employees. In the Nordic region companies have a closer and more symbiotic relationship with the surrounding society, particularly compared with American companies. This includes a different approach to accountability, not least in relation to maintaining relationships with stakeholders. These stakeholders can comprise different types. They could include, for example, customers and suppliers, as well as trade unions, volunteer organizations and individuals who may live near the company. You could say that Nordic companies do not limit their corporate responsibility to financial profit, but consider a much wider perspective. Many Nordic leaders would argue that there is no conflict between responsibility and maximizing the value of your company, because in the long term, social and environmental issues become financial issues.
Research suggests that leadership styles around the world are very much influenced by values and culture in that specific region. On the deepest level, being a leader consists of ethical considerations, such as how democracy, human dignity, responsibility, obligations, rights and the individual’s role in relation to the community are viewed.
This brings us to the question why anyone should care. In her book “On the move. Lessons for the Future from Nordic Leaders” , Pernille Hippe Brun addresses the same question. In the book she interviews 58 Nordic business leaders which all had one thing in common: they had grown up and been educated in the Nordic countries, but then left the region to pursue a career abroad. Brun’s answer concerns the ethical considerations behind the leadership style. She means that even though they are small countries, Nordic leaders know how to build great companies “ready to do good in the world, focused on more than just short-term profit and the bottom line”. Nordic leaders are leading the way “not only in business but in addressing issues relating to social infrastructure, sustainability, and well-being.”
Criticism against the Nordic leadership style of course also exists. One source of criticism is that it is in danger of coming close to the concept of ‘leaderless democracy’, where decisions are already taken by others in the organization and not by the leader. Hence, there is a risk of leadership almost exclusively concerning administration and HR issues. One way to combat “leaderless democracy” is by having well defined strategies. As I see it, that is one major success factor behind the successes of Novo Nordic, who’s CEO Lars Sørensen twice has been propelled to the top of Harvard Business Review’s ranking of best performing CEO in the world.
Interesting enough, my report received most attention outside the Nordic countries, and especially in Eastern Europe: in the Baltic countries, in Poland and Belarus, where I have traveled several times to talk about Nordic leadership. As I see it, they are countries in a state of rapid change looking for inspiration in their development from other countries around the world. Maybe the Nordic leadership in the future won’t be something specific for the Nordic countries, but something that also could be found in other parts of the world as well. Let’s hope so…
The case of Japan is delicate. It is true that Thatcher-Reagan style reform came to Japan very late, but it became the leading principle of Koizumi Cabinet (2001－2006). Mr Koizumi himself may not be an adherent to neoliberalism. After he was retired, he is now trying to persuade people to get out of atomic power energy system. One of his brain was Heizō Takenaka, once the minister in charge of economic and budgetary reform and a leading designer of Koizumi reform. Takenaka denies he is a neoliberal, but his political economic thought is quite close to neoliberalism.
Not all academic pursuits are science
Comment on Gerald Holtham on ‘The problems of economics as an academic pursuit have a sociological origin’
Gerald Holtham maintains “The problems of economics as an academic pursuit have a sociological origin.” And “This situation has created a strong form of credentialism among academic economists, evidenced by the use in the USA of the term “PHD economist” i.e. distinguishing a ‘real’ economist from an economic journalist or mere informed commentator. This desire to define and secure a profession of economists has led not only to credentialism but to formalism. There must be hoops to jump through, filters to pass, if ‘real’ economists are to be distinguished. An emphasis on mathematical technique is just such a filter.”
First, what is the core problem of economics? The problem is that economics is a failed science. Everybody knows it but nobody knows how to get out of the mess “There is another alternative: to formulate a completely new research program and conceptual approach. As we have seen, this is often spoken of, but there is still no indication of what it might mean.” (Ingrao et al.)#1
So, economics is fake science or, in the words of Feynman, cargo cult science: “They’re doing everything right. The form is perfect. … But it doesn’t work. … So I call these things cargo cult science because they follow all the apparent precepts and forms of scientific investigation, but they’re missing something essential.” (Feynman)#2
The lack of scientific competence can hardly be overstated. Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism are mutually contradictory, axiomatically false, and materially/ formally inconsistent. Economics is a failed science.#3 All the usual signifiers of science, though, from peer review to formalization to the BoS Nobel are in place. What is lacking is the true theory.
“In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
So the “problems of economics as an academic pursuit” are (i) for 200+ years now, economics has not risen above the proto-scientific level, #3, #4 and (ii), economists are not scientists but clowns and useful idiots in the political Circus Maximus.#4
Academic economists are not selected and employed and paid and promoted and honored for scientific achievements but for their political usefulness. The sociology of economics is indeed quite simple: it has always been agenda-pushing for the Oligarchy.#5
Egmont Kakarot-Handtke
#1 Feeble minds, shaky assumptions, and the inevitable failure of economics
https://axecorg.blogspot.com/2016/07/feeble-minds-shaky-assumptions-and.html
#2 Both orthodox and heterodox economists are cargo cult scientists
https://axecorg.blogspot.com/2018/05/both-orthodox-and-heterodox-economists.html
#3 Sovereign Economics, Ch. 13, The indelible scientific disgrace of economics
https://www.bod.de/buchshop/sovereign-economics-egmont-kakarot-handtke-9783751946490
#4 Wikipedia, economics, scientific knowledge, or political agenda pushing?
https://axecorg.blogspot.com/2020/06/wikipedia-economics-scientific.html
#5 Cross-references: Political Economics/Stupidity/Corruption
https://axecorg.blogspot.com/2015/11/political-economics-cross-references.html
Craig
The productive capacity of an economy at any time is limited. That is to say it is not infinite. If the claims on production exceed that capacity some of those claims, when they are exercised, will fail. They will be disappointed. There will either be rationing or a rise in prices until the claims and capacity come into balance. What you cannot seem to acknowledge is that simple fact is true, however the claims come into existence. Repeat: however those claims come into existence. Whether they are the result of credit creation or gifted by a beneficent government they have to be in broad balance with the real economy’s productive potential.
A monopoly of money creation by the government could reduce economic fluctuations caused by a credit cycle. If money is handed out the distribution could also be used to counter income inequality. Granted – people have understood the attractions of the approach. But it cannot abolish the requirement to keep the monetary system and the real economy in balance. You sucked the 50 per cent discount number out of your thumb but you have no idea what the effect would be of doubling the effective income of consumers. Perhaps you can get away with 10 per cent or 20 per cent. You don’t know what the appropriate level is. And nor does anyone else. You don’t have any theory about that or how the rate of monetary issuance should be calibrated. When I asked you once before you told me the answer was grace. She must be quite a girl.
If, as you say, the system ends up with lower prices, yet there is twice as much money circulating we have a problem. money stock x velocity of circulation = prices x transactions. That is not a theory but an identity, something true by definition. More money, continued circulation (ie velocity maintained, no hoarding) and lower prices must mean transactions are up. Fine. when those transactions hit a physical practical limit, something else has to give. There’s nothing in what you write that suggests you even understand the issue, never mind how to deal with it.
Gerald,
You’re entire post is mere flawed orthodoxy regarding the quantity theory of money and the velocity of it circulation, and the present flawed, mistaken and ethically challenged thinking regarding what a free market actually is. And the new monetary and financial paradigm dispels the above.
In the first place most productive facilities do not operate at full capacity so even though we will undoubtedly see an uptick in consumption virtually no one will probably be so panicked by their new relative monetary abundance that they will actually feel they need to eat twice as much food or buy twice as many pairs of underwear. Thus it is a red herring that an increase in money will necessarily cause scarcity of ability to produce and deliver; and as the economic vice of arbitrary and self serving price rises (which are allowed or overlooked in the present mistaken and ethically challenged ideas describing “free markets”) will be taxed severely….as ethically challenged, arbitrary and self serving….none of which are aspects of the natural philosophical concept of grace by the way.
The 50% discount is well conceived because it will utterly resolve the garden variety low single digit form of inflation above described in the above ethically challenged “freedom” in “free” markets, and also because the high percentage discount will give enterprise a sane and personally BENEFICIAL “offer it cannot refuse” because if they have to get 100% of their best price from the consumer and their competition only has to get 50%….how many enterprises are going to opt out of that policy and the additional cost and tax cutting benefits I’ve described here a hundred times????? Also, enterprise will still be free to jack up their prices arbitrarily, but they’ll not only get taxed severely for it, but if their competition abides by the rules and either keeps their prices the same or even cuts them…how much market share is the idiot rule breaking and unappreciative enterprise going to lose?
Finally, hyperinflation never occurs without several prior disastrous events taking place before hand including and most importantly a compliant central bank leveraging up speculators so they can short the currency, and that can be avoided by simply declaring before hand that any such attempt foreign of domestic to do so will be considered null and void.
Finally, finally, even if we’re not able to completely extinguish garden variety low single digit inflation with regulation all we’d need to do is index the discount to inflation by making 51-53% and no harm, no fuss.
There is no freedom in the human temporal universe except amongst barriers, and the pinnacle concept of wisdom and ethics is grace as in love in action/systemic policy. The quicker commercial agents and economic pundits come to accept that the more rational and better off everyone will be and the more gracefully free flowing the economy will continuously be.
Robert,
Post WWII the Germans were considered very economically liberal compared to the British and the French. They are though less prone to intellectual fashion than the British who, since 1945, have gone from dirigism through Keynesianism to neo-liberalism. In that sense it is the British who are the international outlier in the extent to how febrile is their political economy. Most nations took steps toward neo-liberalism after the oil crises of 1974-79, including Germany, but not many stood on their head like the Brits. I’m not sure the eighteenth century has anything to do with it.
One of Germany’s saving graces was it never accepted the US doctrine of shareholder primacy as the UK did. The upshot of that doctrine has been treating companies as financial artefacts to be traded. Too many of the cleverest people end up in financial engineering rather than building or maintaining companies making excellent products. CEOs last only a few year so short-termism is rife. That precludes the sort of Nordic management you describe since its benefits accrue over time compared with maximising worker exploitation for immediate profit.
The German system has its own weaknesses of course but those are another story.
“I’m not sure the eighteenth century has anything to do with it.”
If you were an historian, you would be sure. I spent more than 10 years grappling with the problem, when I wrote my dissertation. French Legitimists and the Politics of Moral Order in the Early Third Republic, Princeton, 1974. You might start with R.R. Palmer’s Age of the Democratic Revolution to see what I am talking about.
One of Germany’s saving graces was it never accepted the US doctrine of shareholder primacy as the UK did.
Corredct, and the roots for their rejecion can be traced, as I did, to Imperial Germany.and the Weimar Republic. Americans put a lot of pressure on the german government to accept shareholder primacy during the occupation. but failed. The Germans did not want any part of this neoliberalism.
For the Western world, the period from 1760 to 1800 was the great revolutionary era in which the outlines of the modern democratic state came into being. Here for the first time in one volume is R. R. Palmer’s magisterial account of this incendiary age.
The Age of the Democratic Revolution: A Political History of …
There is so much interesting discussion here that it needs to be recapped before it can be responded to in any way adequately. I begin with Gerald Holtham’s article:
Gerry:” The answer to people doing it wrong is not to despair and retreat into philosophy; the answer is to do it right”.
Lars: “Great article, Gerry! But I would still argue that both philosophy and methodology … to a large degree can help us getting things right ”
Antireifier on sociology: “The legal sanctions I am subject to as a social worker are put in place by politics”.
Econoclast: ““There must be hoops to jump through, filters to pass, if “real” economists are to be distinguished. An emphasis on mathematical technique is just such a filter.” Behind this we find Jevons, but “what has driven the process all along has been the need to provide the imperial clothes for the ruling power of predatory corporate capital”.
Iconoclast: Despite agreeing with Lars, “it is instructive what a damning case can be made against neoliberalism (market fundamentalism) by simply sticking to the evidence of its outcomes as Kuttner has done.”
Craig: Again agrees with Lars, adding “The [philosophical] concept of grace accurately describes the temporal universe and the economy in that both are interactive, integrative and flowing processes”. [I can’t see a name describes anything, but it can get us looking in the right direction].
Robert: “when a science cannot explain something but is nonethless clung to, that science becomes ideology”.
Iconoclast, discussing the relevance of Kuttner: “Old hat is not old hat to new people or to people new to taking political economy more seriously”.
Robert: “Its a problem, making people historically aware, but I thought this was one of the missions of this blog.”
Iconoclast, agreeing, says: “there are great practical and research difficulties in finding out “what really happened” and presenting it in an objective fashion. The historiography of history matters”. So he shares his own.
Robert: “For some reason, as you do, people say they respect historians, and then ignore them. That’s my problem with economists and sociologists”.
Yoshinori joins in, Gerry comes back and Craig muddies the waters with “Apparently no one here except myself has the guts to suggest specific policies that would change neo-classical economics into something not only better but a thirdness greater oneness”.
Iconoclast: “have I completely misconstrued this? But logically speaking, the government is the only party with any “incentive” or rather with the remit and capacity to offer the discount/rebate”.
Craig hasn’t told us what motivates his “grace”, though in the discussion of Modern Monetary Theory I myself gave an answer seen in G K Chesterton’s reaction to 1840’s economist John Stuart Mill’s “Utilitarianism”: we should be seeking not happiness but the causes of happiness. “Happiness is a chain reaction” in which each of the links is formed by giving generating gratitude which motivates graceful further giving. Sight of Leavitt’s Diamond left me seeing the chain with the links overlaid to form a circuit diagram, with happiness interpreted as the aim of a cybernetic (i.e. PID) control system.
Herbert recaps: “The methodology is always part of the theory. The use of a certain methodology inevitably leads to the same type of theory. By standardizing research methods, we lock ourselves in the illusion of knowledge. The truth of the theory must be substantiated by non-economic parameters, and perhaps for this, it will be necessary to revise sociology and history, to build a new social model, different from capitalism and socialism, and common to all history.”
So that’s what I’ve done, the applicability of the PID theory to economics, its monetary control mechanism and today’s rampant chrematism being substantiated both logically and empirically all the way from the Big Bang. And Robert has predicted the outcome: ” For some reason, as you [Iconoclast, and I would add Lars] do, people say they respect historians, and then ignore them”. Let’s not despair. It doesn’t have to be like that.
Since my starting this, Robert (so appreciative of engineering) has cited R R Palmer on the 1760-1800 period. I wonder if this was actually the H R Palmer who (refuting Gerry’s original contention here at an inaugural Civils meeting in 1818) said :
“An engineer is a mediator between the philosopher and the working mechanic, and, like an interpreter between two foreigners, must understand the language of both. Hence the absolute necessity of h is possessing both practical and theoretical knowledge”.
“Craig hasn’t told us what motivates his “grace”,
Personal experience of its natural glory, a study of the world’s major wisdom traditions, its logical applicability to the economy and money system, and a study of the signatures of genuine paradigm changes.
Craig, I can see from this what motivates your own gracefulness, but the problem is, how to pass it on? How to make gracefulness the norm, in an economy not even comprised of students of philosophy but of everything from hungry babies to senile old men and women, each having aims, ambitions and handicaps relevant to their stage in life? As I see it, it won’t happen when the reigning philosophy of those old enough to have one is “divide and rule”, lack of credit when they need it leaving younger ones (with responsibilities) competing for a living. Giving everyone their living, thereby taking away the capitalist stick and reducing rulers to advisors on and accreditors of graceful living, leaves some hope of our grasping the need for forebearance, forgiveness and using spare capacity to make good, when our aims inevitably conflict.
Gerald are you familiar with the Hans-Ulrich Wehler school of German historians, who dominated German historiography most of the late 20th century. Politically, in Wehler’s opinion, the new unified Germany (1871) retained values that were aristocratic and feudal, anti-democratic and pre-modern. In Wehler’s view, the efforts of the reactionary German élite to retain power led to the outbreak of the First World War in 1914, the failure of the Weimar Republic and the coming of the Third Reich. According to Wehler what happened in the 18th-19th century had very much to do with subsequent German development.
“R R Palmer on the 1760-1800 period. I wonder if this was actually the H R Palmer who (refuting Gerry’s original contention here at an inaugural Civils meeting in 1818) said”
Robert Roswell Palmer (1909-2002), well respected Princeton historian, who wrote a lot about the French Revolution, including Twelve Who Ruled, the Committee of Public Safety that brought “Terror” to the French Revolution.
Thanks for this, Robert.
Robert, I am not familiar with the Wehler school of historians but I am aware of the proposed causal sequence you outline. German unification was based on Prussia after all. I would never dispute that events are always conditioned by historical influences. The French are even less prone to neoliberalism than the Germans but their tradition is more statist and less corporatist. I am sure that fact has historical roots too extending even before the 18th century and I bow to your greater knowledge of the history. The puzzle to me is the instability of economic philosophy and doctrine in the UK which has been swept by contradictory fashions several times in my lifetime.
I agree. I started as a great admirer of Fabian socialism, only to be disappointed of the little englander who took over the Labour Party. Churdhill, I think, had he the tine and power, would have put Britain at the head of the European Union, rather than let it seek Imperial glory again under Thatcher. What a missed oportunisty.
The explanation of the puzzle is that Fabian socialism is state capitalism, so that the options are reduced to an apparent contradiction between power-seeking and profit seeking versions of the same capitalisms, which are both dominated by centralised finance. Who are you describing as a “little englander”, Robert? If you had followed the story lines here recently about slave trading, apartheid and the bombing of Dresden, you might be more sympathetic to the philosophy of “satisficing” and less enamoured of pound-selling, “gold-standard” Churchill, whose successors promoted American enslavement with their Trojan horse reinterpretation of Community as Unity. Their treachery has come home to roost. Today’s capitalist “little englanders” – Fabians and neo-liberal conservative Imperialists alike – can’t even keep their own kingdom united. A cooperative form of localism is needed to transcend this sociology.
Craig,
I fear that your post confirms that you don’t understand the problem. An identity is an identity and is not altered by altering the means by which one of the variables is generated.
Let’s clear away some points that are not in dispute. It is true that economies do not generally operate absolutely at full capacity. It is also true that an increase in the quantity of money does not necessarily cause an inflation far less a hyperinflation. Those are straw men that no-one is maintaining. The fact remains that a balance between money and real economic capacity has to be maintained. The present system does it very imperfectly. That is also agreed. It is quite unclear (not just to me !) how your proposed system does so. You seem to think there is no risk of political factors leading to an imbalance. And your 50 per cent price subsidy is an example of spurious precision since there is no justification for that particular number.
There is an active group that argues for a government monopoly of money creation including direct transfers to citizens accounts, as you do. It is called “Positive Money” and has attracted support from people like Martin Wolf the Financial Times’ economic commentator. The idea has merits but also difficulties. Apart from the issue of calibrating the money supply, one of the problems is they want private banks to make loans to businesses for investment. Government control of all investments does not have a good track record, after all. But how to stop bank credit creating money automatically? They have a complicated system of trying to separate investment accounts from transactions accounts at banks but it is far from clear that would work. They, though, have tried to address the practical problems with their proposal, which you refuse to do. That is the difference between analysis and faith, I suppose.
“The fact remains that a balance between money and real economic capacity has to be maintained.”
No it doesn’t. That is pure orthodoxy. Presently there is not enough money actually available by 95% of the populace to enable the economy to function well, but way more money sitting around in god knows where and what savings or investment accounts. With the 50% discount/rebate there would be much more than enough of the former and, after perhaps a time of fairly substantially increased consumption (mostly by the poor) consumption would probably level off in a manageable way and savings or investment would undoubtedly increase for virtually all. In the interim there would be no problem with the boogie man of inflation as retail sale is the terminal expression point for inflation….and the discount completely eliminates that possibility. And as I have already posted even if we had its smallish single digit garden variety, despite regulation, we could just index the discount to it, so no big deal.
Steve Keen has destroyed the notion that the economy tends and should tend toward an equilibrium. I’m just showing us how we can have the more prosperous and ethically efficacious monetary disequilibrium.
“But how to stop bank credit creating money automatically?”
By creating a truly national publicly administered non-profit banking and financial system that had strict mandated purposes and regulations, and that was made a fourth branch of government with full arms length separation from the executive and legislative branches. For profit banks could not compete with such, but they would be allowed (within strict sanctions against idiocies like synthetic derivatives and currency shorting etc) to manage already created monies…by the national system.
“They, though, have tried to address the practical problems with their proposal, which you refuse to do. That is the difference between analysis and faith, I suppose.”
Well, as you see above, you suppose wrongly. And I’ve raised these issues and their resolution on here numerous times before in the same straightforward and practical way. Our founding fathers here in America definitely “dropped the ball” on money. The revolution was fought over the the King and the Bank of England banishing the colonies’ various money creating schemes, not over some miniscule tax on tea. And then right afterward implemented a Bank of England system. ?????? So its 224 years overdue to rectify the situation.
Gerald Holtham,
I agree in general with your criticisms of Craig’s position. It is always tempting for any one of us to fixate on a simplistic solution to a complex problem. I’ve been guilty of this myself, many a time. I think it’s part of the human condition. The world is always more complex than our most complex models, even if some our models possess some homomorphic accuracy as truth correspondence in relation to real systems.
Economics is a particularly vexed discipline as it involves the interactions of formal systems and real systems WHERE the formal systems are substantially prescriptive (not descriptive) and they influence real systems. (Hard science is different. Physics formulae, the successfully tested ones, describe but never prescribe system variables.) Money influences people and their behaviors as agents. People are real systems, having real physiological systems including real brain and nervous systems. People then manipulate their bodies and their machines to influence the real economy and real environment.
Like many, I reject the “neutrality of money” thesis. Money does indeed affect the system as outlined above. A consideration of money as information provides a proof that money is not neutral. Information is a real system characteristic (as well as a formal system characteristic in humanly created formal systems) and information is not neutral in real systems. Just consider the difference a mutation in genetic code information can make.
The diametric opposite of the “neutrality of money” thesis is what I could call “the omnipotence of money” thesis. With theories like MMT, Positive Money and those favoring gold as currency, there is a temptation for enthusiastic lay advocates of such theories to fall into a mode which essentially attributes omnipotent powers to money properly managed. It becomes a view where all economic problems can be reduced to the issue of proper and improper currency creation and monetary management.
But economics confronts us with real problems as well as formal problems. Furthermore, the two interact. For example ECB Vice-President Vitor Constancio has stated that Positive Money’s proposals “would not create enough funding for investment and growth.” However, given limits to growth (endless growth of the real economy is impossible) and now near-term problems (like climate change), this feature of Positive Money (if true) might well be a positive feature and not a fault at all. This is simply an example that the formal management of money always has to be tailored to real features of the real systems (real economy and real environment). A purist formalist theory of any kind that sets in stone a monetary setting (50% for the discount/rebate) while ignoring real variables of the total real environment of real people, real economy and real ecologies, will be unworkable. And that’s what I think you say by questioning the 50% setting. This is leaving aside any deeper questioning of what is essentially a negative value added tax with concomitant monetary and tax changes.
“The world is always more complex than our most complex models, even if some our models possess some homomorphic accuracy as truth correspondence in relation to real systems.”
Of course systems are complex, and I have never said that the new monetary paradigm would solve every economic problem, just the biggest, deepest and most urgently needed to be resolved one. Your statement is really nothing more than a refusal to think in terms of paradigm/pattern change which as I have posted before is probably what most bedevils people’s analysis on this blog. Furthermore and what I have also posted here many times before, the key to perceiving and understanding paradigms is simplicity not complexity. Further still a paradigm is an inherently integrative “thing” in that it is a single deep simplicity that fits seamlessly within and transforms an entire complexity/pattern. Money as Debt Only already is utterly integrated into the economy and money as gifting hence will be able to be integrated into the economy as well.
I have also said that despite everything adapting to the new paradigm, which is a signature of a genuine one, that further regulations will be necessary to keep the less than sane and other intentioned from inhibiting its inevitable effects, so yes I have acknowledged that more than suggestion is necessary, namely the other policies and regulations I’ve posted.
“A purist formalist theory of any kind that sets in stone a monetary setting (50% for the discount/rebate) while ignoring real variables of the total real environment of real people, real economy and real ecologies, will be unworkable.”
As I just pointed out I don’t do that. And as I pointed out in prior posts on this thread there is excellent reason for having a numerically high discount percentage because it is then virtually both un-gameable and also so remarkably beneficial for commercial agents….that it becomes a benign “offer they cannot refuse”. It’s also catchier and mathematically simpler to comprehend which will make it easier for the general populace to understand….when and if myself or someone else ever gets a mass movement going to herd the political and economic apparatus toward sanity.
Finally, no one here has even come close to offering an ecologically sane, potentially politically integrative, hence much more doable and bottom up green policy like my second 50% discount/debt jubilee policy at the point of note signing. So that critique doesn’t fit either.
“This is leaving aside any deeper questioning of what is essentially a negative value added tax with concomitant monetary and tax changes.”
No, It’s a universally negative price value subtracted monetary ASSIST with concomitant/rebate and tax changes.
Says Craig: “Your [Iconoclast’s] statement is really nothing more than a refusal to think in terms of paradigm/pattern change which as I have posted before is probably what most bedevils people’s analysis on this blog”.
Not true of me, and at least I understand what is meant by the terms ‘paradigm’ and complexity. Craig is left “hoist by his own petard” by his refusal to consider his proposal not applying to those with no income, and monetary debt jubilees (account settling) only being justified when the real debt (planting and nurturing next year’s corn) has been repaid or become unrepayable (water under the bridge). I find it extraordinary how lucid Craig becomes when putting down other people’s arguments, and how ideological when defending his own. Must be lack of self-education rather than inability.
Craig, try criticising rather than defending your 50% discount policy, starting from my comment above agreeing with you on the importance of grace: October 3, 11:39 am. That may be more literary than lucid, but it seems to cover all the angles.
Dave,
“Craig is left “hoist by his own petard” by his refusal to consider his proposal not applying to those with no income, and monetary debt jubilees (account settling) only being justified when the real debt (planting and nurturing next year’s corn) has been repaid or become unrepayable (water under the bridge).”
You raised this once before and it doesn’t apply because the 50% discount/rebate isn’t the only monetary gifting policy I’m recommending. There is also a $1000/mo. universal monthly dividend that paired with the 50% discount/rebate guarantees everyone 18 and older $2000/mo. worth of purchasing power. That’s UNIVERSAL, so there’s no adult that is left without monetary support.
As for the debt jubilee, the problem is not only the monetary paradigm of Debt Only, but the negative economic effects of the STILL EXISTING huge debt overhang of private individual and corporate debt. Hence, the debt jubilee is imminently just and economically called for, unless of course one wants to maintain the tremendously unfair and enforced debt slavery we currently have had foisted upon us by the profligate asset inflation in the run up to the Great Financial Recession of 2008.
“I find it extraordinary how lucid Craig becomes when putting down other people’s arguments, and how ideological when defending his own. Must be lack of self-education rather than inability.”
#1 ad hominem
#2 I’ve been giving legitimate economic justifications for my policies in these recent posts not just ideology, and
#3 As I once told Steve Keen, “If there is one thing less accurate than neo-classical macro-economics, it’s long distance anonymous internet psycho-analysis.
#1 not intended. (More praise than calumny).
#2 not (so far as I can see) true.
#3 I’m not anonymous, Craig. I’m not trying to analyse you, more trying to warn you what you look like to me. Nor am I trying to get at you. The title of the famous book by the non-anonymous Thomas D Harris MD is “I’m OK, You’re OK”.
Worth reading what Google throws up about it, but it is readily available via Amazon, exploring why some folk have difficulty moving on.
Your reference to I’m Ok, You’re Ok by Harris is employing a reified theory about human beings not based on research. It is an interesting way to portray transactional analyses — which I referenced sometimes in my clinical social work — but if you really want to understand why people behave as we do you need to go to the subsequent cognitive psychological research. A non-scientific introduction to that would be Why Bad Beliefs Don’t Die. https://skepticalinquirer.org/2000/11/why-bad-beliefs-dont-die/
Dave,
#1 Good.
#2 Well look a little closer because my policy proposals are aligned with, complete and resolve the problematic observations of heterodox economists like Steve Keen, Michael Hudson and MMT.
#3 The word anonymous was perhaps not well chosen. It was meant to refer to you not knowing me personally.
At any rate I mean no harsh critique of you. I think we’re in much closer philosophical agreement than many others on this blog.
Antireifier, we probably disagree on whether ‘research’ means ‘looking at the facts’ or looking at what other people have said about what other people have said about the facts (which can – but in academia rarely seems to – include their reporting what they see and applying basic physical and communication theory to observable physical structures). I agree with you about needing “to go to the subsequent cognitive psychological research” (i.e. Jung rather than Freud) in that Freud (however observable) is only explicable in terms of the by now well-researched physiological explanation of Jung, which itself followed G K Chesterton on their being two sides to our brains. If one correctly knows the positive facts, one can deduce the
negative ones, which is why I myself found Harris’s explanation persuasive. Incidentally, there are types of scientist other than clinical social workers not needing non-scientific introductions.
Iconoclast’s rejoinder to the end of Gerald’s comment on October 3, 2020 at 4:36 pm, on Positive Money:
“But economics confronts us with real problems as well as formal problems. Furthermore, the two interact. For example ECB Vice-President Vitor Constancio has stated that Positive Money’s proposals “would not create enough funding for investment and growth.” However, given limits to growth (endless growth of the real economy is impossible) and now near-term problems (like climate change), this feature of Positive Money (if true) might well be a positive feature and not a fault at all”.
Nice points, both. What I want to throw in is the need to eliminate as well as create the necessary funding if one is to avoid the Ponzi circulation that Adam Smith objects to in “The Wealth of Nations”. My [paradigmatic] argument for a “credit card” economy (seeing monetary credit not as the inverse of debt but as a representation of credit [worthiness]), not only allows us to create the currency we need when we need it, but eliminates it insofar as we repay it by doing what we need it for, e.g. earning our keep. The same can be true for cooperatively owned businesses, which include the community businesses currently thought of as NGOs and governments. Unlike Craig, I’m not wanting to defend this position, but believe it worthy of being thought through rather than thrown out.
Regarding the title of this discussion, don’t we have here the Aristotelian sequence of Marx: C1-M-C2? The academic pursuit of money may well have a sociological origin, but more to the point, it needs to end up in a better rather than a worse sociological outcome.
Iconclast. Economic models are not necessarily prescriptive and should not be taken to be. The emphasis on equilibrium night seem to give them a prescriptive quality because it seems awkward to oppose equilibrium. In fact the notion has no necessary normative significance. The use of models for inappropriate propaganda purposes is all too common too and I don’t dispute that. In the particular case of Constancio, I don’t know if he is right or not. The world is complex and we wouldn’t know until we tried. The issue is societies don’t make big changes until they have to, especially when the benefits are uncertain.
We agree on the importance of addressing climate change but that is not a matter of monetary policy.
Craig’s posts, though, make it clear why Lars Syll’s criticism of models goes too far. If Craig modelled his proposal formally it would be clearer to him and to us what assumptions he was making about behaviour and institutions. It would then be easier to discuss without heat. He would also be obliged to respect accounting identities and ensure his model was coherent. He would know what the factors were that determined whether his subsidy should 10, 50 or 80 per cent. Right now he doesn’t know and doesn’t care. Constructing a model at least has the virtue of enforcing clarity. You wouldn’t want to fly in an aeroplane that hadn’t been modelled and tested in a wind tunnel. (Though you would also want the real thing to be flight-tested too!)
“If Craig modelled his proposal formally it would be clearer to him and to us what assumptions he was making about behaviour and institutions. He would also be obliged to respect accounting identities and ensure his model was coherent.
Unlike almost everyone who is off in abstract calculus formulas that make one’s eyes glaze over or other missing of the actual mark theoretical musings I’m pointing out the accounting convention that equal debits and credits sum to zero, and thus the obviously beneficial efficacy of a debit-credit monetary policy at the point of retail sale and also at note signing.
I’m assuming that the vast majority who are currently afflicted by the current system’s lack of economic and monetary democracy will do as the wealthy have always done with their excess, that is, save and invest it.
A paradigm change doesn’t change things that don’t need to be changed or forbid things that either can be understandably encompassed within or align with it. In other words when we went from hunting and gathering to agriculture we didn’t stop hunting, and when The Reformation became a reality people still took the church’s sacraments it’s just that their oppressive monopoly status was eliminated.
“He would know what the factors were that determined whether his subsidy should 10, 50 or 80 per cent. Right now he doesn’t know and doesn’t care.”
Not true. As I have already pointed out the high percentage discount (it might of course be 40% or 75% as when it would be paired with the second discount at note signing) is designed to be irresistibly beneficial for both individual and commercial agents to insure its broad if not complete acceptance, to render normal garden variety inflation non-existent and to make the policy an actual paradigm change by virtue of it inverting current systemic and individual monetary scarcity into problem resolving abundance…the latter of which, again, is an historical signature of genuine paradigm changes.
Or we could just settle for another 5000 years of the palliative reforms of some smallish percentage discount which could be gamed out of its usefulness by garden variety inflation, or of merely increasing government deficits whose effects are indirect, also imminently game able, and so easily undone…exactly like Keynesianism was by the deadly combination of ideology and ignoring the factor of financial wealth and power’s ability to wreck any sane proposal with its current MONOPOLISTIC paradigm of Debt Only. In other words an ACTUAL paradigm change is required….unless we’re just here to chat.
Gerald as usual mixes profound insights [“The issue is societies don’t make big changes until they have to, especially when the benefits are uncertain”] with not comprehending the logical significance of the words he is using. ‘Equilibrium’ for example is a more or less static balance between opposing forces (in the paradigmatic example, pressures at each end of a tube); so that using it already prescribes by diverting discussion away from cybernetic steering, in which we have to generate the actively guiding (not opposing) forces. ‘Models’ and simulations work physically, whereas maths models – like accounting identities – merely equilibrate inputs and outputs. In his criticism of Craig, the word ‘formal’ is a Trojan horse introducing Gerald’s ideological interpretation, where the word ‘structural’ would have left open discussion of what processes were guided by the structure and any need for structural change. That is possible with the familiar working example (paradigm) of the credit card system, but not with Craig’s discount proposal, which lacks structure on which to hang such evidence as is available on how different people react to discounts (some indeed tending towards satisficing, but others buying more to show off).
As for credit cards, let me emphasise that I have been discussing the workings of a known structure, and the need to change repayment in it from fictitious money at interest to earning our keep. Not a big change in practice, Gerald, but a Copernican revolution in the theorising.
For some reason I am not allowed to respond to your previous response to me so I am doing it here. Jung is NOT one of my choices. As I said, Harris has some limited value but being persuaded is different from being critically informed and accepting.
And if you are stuck that far back in time about cognitive science then you are really out of date. Also you made what is clearly a snide comment about my being a social worker. Social work has very little original research for it and follows what you prefer — i.e. it looks at what others say about the research. I prefer to look at Social and Cognitive Psychology to inform me about human behaviour and supplement that with the behavioural scientists looking at actual behaviour such as Kahneman who has done seminal work. Using his framework, your response to me was a System One response. We need more System two. You should try it.
Antireifier, you would have needed to reply to Iconoclast to follow my previous comment. (Agreed it is a pain having only three levels of indentation).
My point about Jung was that you have to know what is right in order to know what is wrong, but I’m not quoting Jung, just pointing to him as the familiar origin of a line of thought. This actually began with Chesterton’s physiology but (in a structural rather than medical sense) may now be most advanced in my own understanding: based on decades of cross-disciplinary research into scientific and economic history, personality differences, electrophysics, control systems, computers and communication science.
My apparently snide remark (not intentional: see your self-description in the second comment on this blog) was actually a response to yours suggesting I needed a non-scientific introduction to behavioural research, which I’ve been involved in since c.1964. I became recognised as a born scientist in an engineer’s hole, but think about H R Palmer’s definition of an engineer, given in response to Robert Locke below.
To the point, I was trying to get through reassuringly to Craig, where Harris’s title as well as his theme were particularly apt.
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Gerald, you make some great contributions to this blog, and often add insightful comments. Lars would be the first to agree with this. But this non sequitur above is not one of them. What Craig posts, believes, claims, etc., have zilch, absolutely nothing of any real substance (no offense meant to you Craig) to do with Lars arguments.
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Lars offers limited valid critiques of certain specific methodologies and of limited scope that have nothing to do with Craig’s views. Apples and oranges. You sound like someone who thinks valid critiques are dangerous things simply because ready solutions are not at hand, so let’s put our heads in the sand and pretend they don’t exist. Fearful of their ” destructive character since there is seemingly no way to address it in classical science” so therefore let’s “trivialize intractability and remain focused on addressing issues for which the available analytical toolkit works (Dolorme 2020).”
Gerald,
There are two parts to my comment. One you mispresent and the other you ignore and proceed to expand (interestingly albeit) on your original emotional outburst connecting Craig and Lars with a non sequitur. But then you could have left Lars out of your response to Craig and made the argument alone as it is a valid one.
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Your argument below is a non sequitur that frankly is silly, and now you are being rather coy and evasive. The core of my comment is is clearly related to the false premise that what Craig posts says something about what Lars posts. Blogs attract all kinds and comments are the views of the commenters only and do not represent the views the author unless the author him/herself explicitly says they do. That is simply an extension of fair play and good will. For you to say that Craig’s posts “make it clear why Lars Syll’s criticism of models goes too far ” you are claiming that something about the way Craig posts says something about the thesis of Lars arguments. That is an unfair and illogical non sequitur requiring assumptions you are not entitled to present as fact. If you deny that simply argument then I think you are the one being emotional and projecting onto others as you did in your comment about Craig’s post which clearly frustrates you emotionally. As I said, what Craig posts is apples to Lar’s oranges.
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Also, no where did I say you said “Lars arguments about modelling were wrong,” but rather I stated my views on what Lars is doing on this blog. I never addressed the question of whether he sometimes may “go to far” because frankly, I think you sometimes (when not engaging in silly non sequiturs) do a fine job of providing an alternative view. Why would you connect Craig’s arguments (frankly I don’t think they are cogent and your logical responses are articulate and clear why) with Lars the way you did? My comment on that is an observation of what it looks like to me when you make arguments like the one I was responding to (Craig qua Lars) and is a viewpoint, and observation, and everyone is entitled to one of those. It is just facts we are not entitled to and it is not a fact that what Craig posts says anything substantive about what Lars posts, which IS what you said.
Mr. Holtham et al,
“Craig” really does have a “model” lodged in the recesses of his mind. It’s the old time “A+ B theorem” of Major Douglas & the “funny money” policies that were its applications. He & his kameraden on RWER are just calling it by a other names appropriate to its zombie resurrection: “gifting”, MMT, ‘ quantitative easing’ ,Argentinian monetary policy, a.k.a self-“gifting” via the printing press & stratospheric borrowing: Sort of like the 16 years of the Obama & Clinton administrations. Or “grace”, i the jargon of sanctimony & old time panacea/conspiracy theory. Almost a century ago John Maynard Keynes, Ralph Hawtrey & the British Actuarial Society demolished that stuff, without even raising a sweat. It just keeps on making the rounds like an fading voice synthesizer.. Please GOOGLE: {1} Norman L. Roth {2}Norman L. Roth, economics {3} Norman L. Roth, economics {4} Norman L. Roth, Technological Time
No its not Norman. Your slurring, word salad and completely untruthful post has no real basis in truth, especially regarding the Hawtrey Report wherein Douglas corrected all of their abstract nonsense about money and credit with his money is most basically accounting insight, but they would see no evil and hear no evil in orthodox simian style. And Keynes of course insulted Douglas…and then later (perhaps unconsciously because he never understood Douglas in the first place) wrote a passage in his general theory….that affirmed Douglas’ A + B theorem.
Also, I’ve run it past all of the people on the Social Credit google group and none of them can countenance it because they have their heads too far up Douglas’ backside.
Douglas WAS insightful, I will give him his due, but even he was caught up in his present paradigmatic horizon of classical economics’ concept of general equilibrium. Also, the concept of a paradigm hadn’t been clearly expressed or researched at that time let alone a study of its historical signatures, all of which signatures Wisdomics-Gracenomics fulfills and affirms.
I have taken a couple of Douglas’ forms of policy and his insight that money’s most basic nature is accounting, and paradigmatically innovated them…which economically makes all the difference in the world….whether you or anyone else is willing to look at it directly and see its immediate policy effects in the temporal universe….or not.
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I believe the comment below reveals Delmore was of perfect understanding of what your meanings were in your anachronistic attempt at whiggish history and the only deplorable thing about the exchange was your rank scientism.
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His paper (and the book it is now published in which I am reading) are not difficult to understand. In fact, your many comments on this blog as well as your book provide an archetypal example of the very problem he illuminates in his paper (i.e., the trivializing or assuming away real-world complexity and non-trivial phenomenal intractability, conflating computational intractability with real-world phenomenal intractability (i.e., four year child out problem solving a supercomputer in certain contexts).
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The sad part of your deplorable behavior is that his ideas might just help you “avoid the overconfidence in the effectiveness of theory that economics and social science often harbor through a usual way of theorizing that deprives itself of, or excludes, the possibility of nontrivial phenomenal intractability (Dolorme 2017, in Davis, John (2020) Economic Philosophy: Complexities in Economics . WEA. Locations 286-289.).”
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I promise you I will expand at great length on exactly this topic.
Not sure we needed this. Yoshinori has done himself enough damage, and given his eye problems it may be time now to be kind.
From Yorshinori;s standpoint you must sound like a lot of ignorant arrogant Westerners. Also from my standpoint, as one who has learned a lot from him, because he grew up in a different sociology.
Ken having resurrected the discussion of Friedman, this is the sort of comment by Yoshinori in which he damages himself by attacking straw men [16 September 2020 at 4.29 am]:
“If you cannot persuade those who believe that market economy is not ideal but better than any other systems ever proposed, you cannot change the capitalism by simply accusing greedy capitalism”.
Personally, I’ve only ever seen greed as marginal to the issue of structural injustice. More to the point is Yoshinori muddying the waters by not distinguishing between real markets and price manipulation in the FIRE economy: whether or not that is seen as monetary control of the real economy or (as it has recently become) rampant chrematism.
Dave, I am not Mr. Trump. There is no need that you should be unnecessarily kind for me. What I hope in this blog-argument is an accurate understanding and fair judgement on what one proposes.
Dave says:
I wonder how this kind of gross misunderstanding occurs. I am the very person that proposes to distinguish two price mechanisms in real economy and financial economy. Read for example this part of our book (This is the part that I wrote):
Marc Lavoie who has written a book review on our book confirms this in the following expression:
Did Dave have misread this part?
Dear Yoshinori, I am happy to have given you the opportunity to explain yourself at length, though I was reacting to what Robert wrote, very much to the point of the cultural issue: what you must think of ignorant Westerners. I had begun by comparing your relative mastery of English with my almost complete ignorance of Japanese, but I’ve been increasingly irritated by your attacking philosophical and macro arguments by changing the perspective to micro. What is so irritating to me is that we both see the need to address the Foundations of Evolutionary Logic, but it has transpired you are seeking and Lavoie expecting conventional Micro foundations, whereas I am trying to argue the case for Macro foundations which actually explain the logic, and why it is not different in the FIRE economy but applied at a later stage of economic evolution. In short I was putting the other side of Robert’s argument: what this Western logician thinks of a Japanese economists’s ignorance of developments in logic.
To overcome our differences you need to get your head round Lars’ philosophical position on methodological under-labouring, and the idea of a Macro understanding of logic as a method of reasoning as against your Micro understanding of it as steps in your argument.
Apologies, by the way, if my consideration for your health came over as patronising.
For the benefit of any onlookers new to this argument:
“We both see the need to address the Foundations of Evolutionary Logic, but it has transpired you are seeking and Lavoie expecting conventional Micro foundations, whereas I am trying to argue the case for Macro foundations which actually explain the logic, and why it is not different in the FIRE economy but applied at a later stage of economic evolution”.
A simple example of such Macro foundations is found in arabic numbering. All the units start off empty, but the number evolves as units are added. Figuratively, if an economy is at the millions level, only a bit it will become a FIRE economy on the way to becoming a single chrematism: a 1,000,000,000,000 which empties all the levels of reality that made it up.
Apologies. For “levels of reality” read “levels of representation”.
Dave, you so often misfire (in October 5, 2020 at 3:34 pm comment). Robert Locke in his October 5, 2020 at 12:06 pm comment does not talk about you. He is talking of Meta Capitalist (in October 5, 2020 at 10:38 am post) without naming him. (N.B. I do not think that Meta is “ignorant arrogant Westerners.” He knows many things, perhaps too many things but lacks depth in his ideas with regards to economics.)
If you have “been increasingly irritated by [my] attacking philosophical and macro arguments by changing the perspective to micro,” why do you not argue those points concretely? Accumulating frustration does not imply that you are thinking correctly. Please hit the very weak points of my arguments in which you think I am wrong. Personal attacks on me like Meta have little effects, because they do not strengthen attackers’ claims. Clever readers can know that such personal attacks only show their logical defeats.
If you think that Marc Lavoie and I are you are seeking conventional Micro foundations, it means that you did not understand the content of our “microfoundations”. Microfoundations we are proposing are deeply different from those of mainstream economics. They are not conventional at all.
Let me repeat what I have written in my post on October 5, 2020 at 6:30 pm. What I hope in this blog-argument is an accurate understanding and fair judgement on what one proposes.
Meta,
You should read more carefully and not react emotionally to what you think you read at first glance. I did not say Lars arguments about modelling were wrong, I said they went too far. Criticising a particular approach to modelling, criticising bad practice and particular models are all fine. He sometimes seems to suggest that any formal modelling of any kind at all is illegitimate. If he means that, I have to disagree. Similarly I did not say or imply that Craig and Lars agree, I simply cited Craig’s argument as one that would be strengthened, or at least elucidated, by some formal modelling. If I am right about that it shows that formal modelling has its uses. You can model dynamically in an evolutionary style, like biologists do. You don’t have to assume equilibria. My aim is clarity not to diss anyone.
Your reactions to Shiozawa are also intemperate. You react to a general impression of his writing not to a careful reading of what he says. Hair-trigger reactions lead to a lot of unnecessary heat.
Btw, it is only YOUR assumption that Lars thinks no modeling is valid. That is your conjecture and I have nowhere read on this blog or in his writings him ever making such a claim. In fact in my view he doesn’t dismiss models just argues for a critical use of them and a awareness of their limitations. If you are going to try and argue that Lars argues NO MODELS and NO MODELING then you need to provide the evidence. You have not done this.
Lars certainly criticises what he calls the deductive approach to theorising. What does that imply? Sorry, I’m not going to trawl back through all Lars’ posts for more conclusive evidence. But if I see corroboration going forward I’ll draw it to your attention. Lars could end the suspense by clarifying his own position too.
He does have a tendency to criticise entire approaches to doing economics, not just their inappropriate use or examples of bad practice. He has delivered several anathemas on econometrics in its entirety, for example. My own view is all these techniques can be misused and all can be useful applied carefully in their proper place. Perhaps he agrees with that but his critiques don’t give that impression.
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When you offer specific case examples where certain approaches (or methodologies) have provided useful factual information you help balance Lars critiques (or others claims) I have learned (or at least try to do so) from them. I value your thoughtful posts. You provided cogent examples refuting the dogmatic assertions of one I won’t mention and I noted and studied them and reflected on them until I understood the substance of the argument. Between yourself, Michael Joffe, and many others to many to mention, I have learned much from the comments on this blog.
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Construction models may or may not be bring clarity to question under consideration. Models in themselves don’t guarantee clarity. Again, one is left choosing which assumptions to include and which to leave out. That is not a blanket denial that modeling can be useful, just a due recognition of their limitations. A great book you might enjoy that speaks at great length about modeling is Friedel Weinert (2004) The Scientist as Philosopher: Philosophical Consequences of Great Scientific Discoveries. It also explains the difference between determinism and causality. But I digress.
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You say, ” Lars certainly criticises what he calls the deductive approach to theorising. What does that imply? Sorry, I’m not going to trawl back through all Lars’ posts for more conclusive evidence.”
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So let’s be clear; you provide no evidence, no facts, just emotion laden opinions. That is not an attack; just an observation. What does that imply? Of course I could speculate about what the implies, but speculation inevitably distorts the object of its imagination. And that is just what you do when you say, “What does that imply?” regarding Lars critiques of specific methods and then associate Lars with Craig. You engage in speculation that puts words and views into the mouth of Lars that he himself did not say or write. When Lars seems to speak in to blanket of terms you have, on this blog, offered an alternative view, and that is as it should be. But that is not the same as then moving into unwarranted speculation based on “What does that imply” non sequiturs.
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You know, you didn’t even need to respond to Craig’s post. You well knew the outcome and response you would get. Craig is impervious to anything you argue and you know that. So why respond at all? You imply his posts generate heat; but the only heat Craig’s post generated was in your own mind, enough so that you felt it necessary to make an emotion laden post dragging Lars into the non sequitur outburst. You are projecting YOUR emotional response onto others. The only heat generated was in yourself Gerald. Let’s be honest about this.
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As I said, everyone is entitled to opinions and viewpoints, including the ones above. But let us be clear. These are not factual evidence based arguments. They are emotive assumptions inferring states of mind and views of another human being that have absolutely nothing to do with good science or useful economics or logical argument in the best sense of the term.
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Your PS posts is reasonable and I agree with you, as I do in many other cases. Just not this specific non sequitur.
PS If the argument is that there is a big misallocation of resources in economics with too many man hours spent following and teaching approaches with very low (or no) usefulness and neglect of other, more empirical approaches that are likely to have a higher payoff, then I agree entirely. I think we are all on the same page about that. If there is a difference it is on whether there is “right” and “wrong” way to do economics. The subject is too messy and complicated to yield to any single method we have, in my view. To quote Hicks you have to walk around the building and look at it from different angles.
To try and settle this argument, let’s backtrack. Meta objected to what I saw not as a false inference but as a potentially instructive counter-example:
“Craig’s posts, though, make it clear why Lars Syll’s criticism of models goes too far. If Craig modelled his proposal formally it would be clearer to him and to us what assumptions he was making about behaviour and institutions. ~ Gerald Holtham Spreading Knee Deep Bull”.
Lars’ criticism of formal modelling, it seems to me, has the two dimensions that mathematical models have no substantive content, and the content being supplied by economists starts from superficial assumptions. Craig, I suggest, starts from a fundamental assumption (using the term “grace” where Christians would see that as an effect of gratitude or love). What Gerald is therefore saying is that the logic deriving Craig’s substantive conclusion is obscure, not having been spelled out in the form of a mathematical model.
Where I feel Gerald is missing the point is in thinking the need for diversity arises from the innumerable starting points we superficially see. As the saying goes, “there is more than one way of skinning a cat”, so more than one way of showing love. What is being forgotten is that the starting point of a deductive argument is axiomatic. Axioms are chosen, but chosen on the basis of a philosophical choice between individualism and communal justice: i.e. being grateful; giving credit where it is needed.
The slogan of the Marriage Encounter movement is: “Love is a decision”. If this blog is to achieve anything useful, we could do with a bit more of that here.
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I have been listening to the audio book by John Lewis called Across That Bridge. He marched in Selma across tht bridge at the height of the civil rights movement and tells the story of and history of the civil rights movement in his book. It is moving and reveals the best that Christianity has to offer in terms of the non-violent fruits of the spirit and Goldlen Rule Living. I am not listening to Viktor E. Frankl’s Man’s Search for Meaning, the story of his experience in Nazi concentration camps. Both of these stories and histories show that men and women can rise above their instinctual animal natures and engage in higher levels of moral, ethical, and spiritual awakening in love and service. But beware; we don’t live in Paradise but upon sin struck evolutionary world born in ignorance and evil. Donald Trump is revealing the full cup of wicked selfish self-interest to the world today and many are happy to follow him into the pit and drag everyone else in with them.
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I have empathy for Craig’s altruistic motives, but find his naiveté lacking in the critical pragmatism that makes ideals actionable and capable of realization in society on a wide scale at this time. Recognizing the element of time and that it cannot be bridged in one leap as there is a certain social inertia that requires the cooperation of others who may or may not share one’s vision means that sometimes ideals must adjust to pragmatism. That doesn’t mean the ideals are not worthy ones, only that they must be implemented in ways that are possible; pragmatism plays a role here.
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I have said before, and I will say again, the world is not in an economic or scientific or knowledge crisis. It is in a value crisis and I don’t use the term “value” as economists do as they have sucked all meaning and depth out of the term in the service of materialism. Economics is bankrupt less because of bad theory (although there is plenty of that) but because of a vacuum of ideals and values and abandonment of any kind of reasonable moral grounding in the philosophy of ethics, or what Dave would say love on one another and our fellow creatures including this earth and its environment. But there are bright and intelligent and well-rounded economists too, both past and present, who know this and are leading the way in reforming economics and building new ways of envisioning economics. RWER is a microcosm and hardly represents the full breadth and depth of what is happening. That doesn’t mean I don’t see value in RWER; I do, that is why I have read almost every book they publish, although it is getting hard to keep up as other projects are demanding my time. Ideas like degrowth are appealing to me these days. I find Ken and Robert are right about the importance of history and culture. Economics is part of a bigger whole and it isn’t the only tail wagging the dog, but is in not irrelevant either and should not be left to the Econocracy alone but be critically examined and democratized.
I am now listening to Viktor …
Meta, degrowth seems necessary to me too, but see how the wind is blowing at
Deneke is as good a read as Mirowski, but he too is missing the point of Shannon’s system suppressing noise. Free will is about not reacting, not about trying to make an econometric silk purse out of a sow’s ear.
Dave, If you start with axioms you are building a logical system not an empirical one. For it to apply to a real situation the axioms either have to hold in reality or so nearly so that the logical implications of the model are observable in the working out of reality. Of course you can build such a model with a normative intent: to show that if the axioms applied than a certain desirable outcome would result. Again the model is without necessary empirical content. An empirical model that is not aiming at timeless generality does not start from axioms but from generalisations based on experience, which are thought to apply more or less widely but certainly to the situation being modelled. Both types of model have their uses and drawbacks. It is helpful to know which game you are playing, though. What point am I missing?
“I have empathy for Craig’s altruistic motives, but find his naiveté lacking in the critical pragmatism that makes ideals actionable and capable of realization in society on a wide scale at this time. Recognizing the element of time and that it cannot be bridged in one leap as there is a certain social inertia that requires the cooperation of others who may or may not share one’s vision means that sometimes ideals must adjust to pragmatism. That doesn’t mean the ideals are not worthy ones, only that they must be implemented in ways that are possible; pragmatism plays a role here.”
Money is most basically accounting which has been a finely honed formal system for over 1500 years. Also, I’m the only one here who has suggested we begin a mass socio-economic and political movement to communicate the universal benefits and policy capabilities of such policies. So is that formalized and practical enough?
Steve Keen has recently recognized the importance of accounting in understanding and following the flows of money in the economy, and all he has to do is cognite on the consequent paradigm changing power of a discount/rebate price and money policy at the point of retail sale which makes it the strategically important terminal cost, price and economic factor expression point for every consumer product from a package of chewing gum to an automobile and a home, and that also integratively resolves the sticky and problems of monetary scarcity and inflation in one fell swoop.
I’m not here to de-bunk anyone’s legitimate research, only to affirm and complete the reforms of heterodox theorists like Keen, Hudson, Graeber, Mosler, etc. with the above insights and policies.
Gerald, from my vantage, your perspective about ‘academic’ economics is not quite right. First, academic economists are not always concerned with social problems. On the contrary, such economists are well known for not engaging with social problems. Second, I would change your statement, “The problems of economics as an academic pursuit have a sociological origin,” to read, ‘the pursuit of academic economics is sociological.’ Here, sociological refers to the sociological imagination as described by C. Wright Mills (a sociologist) (2000).
“Nowadays men often feel that their private lives are a series of traps. They sense that within their everyday worlds, they cannot overcome their troubles, and in this feeling, they are often quite correct: What ordinary men are directly aware of and what they try to do are bounded by the private orbits in which they live; their visions and their powers are limited to the close-up scenes of job, family, neighborhood; in other milieux, they move vicariously and remain spectators. And the more aware they become, however vaguely, of ambitions and of threats which transcend their immediate locales, the more trapped they seem to feel.
Underlying this sense of being trapped are seemingly impersonal changes in the very structure of continent-wide societies. The facts of contemporary history are also facts about the success and the failure of individual men and women. When a society is industrialized, a peasant becomes a worker; a feudal lord is liquidated or becomes a businessman. When classes rise or fall, a man is employed or unemployed; when the rate of investment goes up or down, a man takes new heart or goes broke. When wars happen, an insurance salesman becomes a rocket launcher; a store clerk, a radar man; a wife lives alone; a child grows up without a father. Neither the life of an individual nor the history of a society can be understood without understanding both.
Yet men do not usually define the troubles they endure in terms of historical change and institutional contradiction. The well-being they enjoy, they do not usually impute to the big ups and downs of the societies in which they live. Seldom aware of the intricate connection between the patterns of their own lives and the course of world history, ordinary men do not usually know what this connection means for the kinds of men they are becoming and for the kinds of history-making in which they might take part. They do not possess the quality of mind essential to grasp the interplay of man and society, of biography and history, of self and world. They cannot cope with their personal troubles in such ways as to control the structural transformations that usually lie behind them.”
In this context what are social problems with which academic economists might be faced? Their work like that of all social scientists must focus on important, or as it is more usually put, significant, problems. Significant for what? It must be said that by such problems I do not mean merely that they should have political or practical or moral meaning—in any of the senses that may be given to any such terms. Rather, the problems for our work must in the first instance be those that have genuine relevance to our conception of a social structure and to what is happening within it. By ‘genuine relevance’ I mean that our studies be logically connected with such conceptions. And by logically connected’ I mean that there is an open and clear shuttle between broader exhibitions and more detailed information, within both the problem and explanatory phases of our work. The direct empiricism so popular with social scientists today (excepting economists) cannot deal with these needs. Particularly the political meaning of significant. Such empiricism is both overly cautious and overly rigid due to its commitments to notions of objectivity and abstraction. Social problems are as noted social constructs. Arising from our lives within societies. In addition, the great social problems, and human issues of our or other times are both complex and hidden from most of us. If we are to understand these problems and grapple with these issues, we must transform current social science, including economics.
This is my attempt to fill in some of the blanks from your statement, “the answer to people doing it wrong is not to despair and retreat into philosophy; the answer is to do it right. No-one should claim that is easy.” Right now, economics is useless to help describe, understand, and propose possible solutions for the big and complex problems human societies face (e.g., political conflict, climate change, racism, poverty). It remains to be determined if economics can be made useful. What can be said with greater certainty is many economists are working to make economics less useful.